Oil prices try for fresh 3-year highs

by Frankie Norman January 10, 2018, 0:30
Oil prices try for fresh 3-year highs

February West Texas Intermediate crude was up 25 cents, or 0.4%, at $61.98 a barrel on the New York Mercantile Exchange.

U.S. West Texas Intermediate (WTI) crude futures ended Friday's session down 57 cents, or almost 1%, at $61.44 a barrel, falling from the $62.21 high reached the previous day, and last seen in May 2015.

Yet, surging USA production could offset some of the cuts from OPEC producers, as US production rose to 9.78 million barrels a day (MMBPD) in the latest week, according to last Wednesday's report. Baker Hughes on Friday said the United States rig count dropped by five in the last week of the year.

"The potential for new sanctions, which could restrict [crude] supply" is supporting prices, said Geordie Wilkes, a research analyst at brokerage Sucden Financial.

"The fact that the crude benchmarks are establishing highest levels since spring of 2015 on very little fresh fundamental input continues to suggest a strong market underpinning", said Jim Ritterbusch, president of Ritterbusch & Associates, in a Tuesday note. A weekly decline in the number of USA drilling rigs led both contracts to a higher close on Monday (http://www.marketwatch.com/story/api-data-reportedly-show-a-weekly-drop-in-us-crude-supplies-2018-01-03).

"We are in winter, a season in which prices go up as demand for petroleum products goes up", Iranian oil minister added.

Standard Chartered expects oil demand growth to outpace supply growth from non-OPEC countries in both 2018 and 2019, continuing to be the main supporter of prices, analysts wrote Tuesday.

Oil prices have received general support from production cuts led by OPEC and a group of non-OPEC producers led by Russian Federation, which started last January, and are set to last through 2018, as well as from strong economic growth and financial markets.

Market bulls have also been buttressed by the Organization of the Petroleum Exporting Countries' continued compliance with a deal to cut crude production.

The agreement, which was implemented at the start of 2017, was meant to rein in the global supply glut and raise prices.

USA crude production was forecast to climb by 970,000 barrels per day (bpd) in 2018 and rise another 580,000 bpd to 10.85 million bpd in 2019, the EIA said in a monthly report that provided the agency's first outlook for next year.

"Led by USA production, particularly the Permian Basin, and now new oil sands projects in Canada, non-OPEC production is forecast to continue growing through the end of 2019", John Conti, the agency's acting administrator, said in a statement.

US oil and gas production will continue to increase in 2019 as well, to the chagrin of OPEC and Russia-major exporters looking to curb production and reduce competition from American shippers.

Futures extended gains to as much as 1.7% in NY.

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